“The Bank, Mr. Van Buren, is trying to kill me, but I shall kill it,” President Andrew Jackson ominously declared on July 4, 1832, to his political confidante and future vice-president, Martin Van Buren, during the apex of his struggle with the Second Bank of the United States.
His challenge was duly accepted. “This worthy President thinks that because he has scalped Indians and imprisoned judges, he is to have his own way with the Bank. He is mistaken.” Thus wrote a defiant Nicholas Biddle, president of the Second Bank of the United States, in February, 1834.
These ringing, and some might say overheated, rhetorical flourishes characterized the “Bank War” of the early 1830s. It was a war that, in retrospect, was wholly unnecessary and, ultimately, left no winners. As such matters often are, it was the result of political missteps grounded in character flaws of the leading antagonists, with the sparks of the conflict heated into consuming fire by blowhards in politics and the press seeking advantage of money or power.
Chartering the Bank had been a constitutional battleground since before the adoption of the Constitution. The “Financier of the Revolution,” the then-Superintendent of Finance of the United States, Robert Morris, and his protégé, Alexander Hamilton, obtained a charter from the Confederation Congress to set up the Bank of North America. That bank was to stabilize credit, lend funds, and act as a government depository, in effect becoming a national bank. Doubts about Congress’s authority under the Articles of Confederation to charter such a bank led to its eventual demise.
The next round came in 1791 with the chartering of the First Bank of the United States, guided through Congress by Secretary of Treasury Hamilton. While there was no express power in the new constitution for such a congressional charter, Hamilton argued that Congress had the implied power to do so in order to achieve its express powers. Thomas Jefferson, James Madison, and other “strict constructionists” vociferously challenged this expansive reading of Congress’s powers, but lost the battle.
The First Bank’s charter expired in 1811 on a tie vote in the Senate. By that time, its former opponents, grudgingly accepted it as a necessary evil to maintain the United States’ credit and a stable economic system. Though he never lost confidence in the righteousness of his constitutional opinion, even Jefferson had become resigned to its utility. President Madison initially declined to renew the bank. The financial lessons of the War of 1812, taught by an unforgiving reality, forced him to abandon the luxury of theoretical purity. Summoning the ghost of Hamilton, Madison urged Congress to re-charter the bank in 1816. The Supreme Court gave its imprimatur to the new constitutional order in 1819 in McCulloch v. Maryland, with Chief Justice Marshall cleverly using this history and Madison’s epiphany to provide for the Bank a constitutional foundation through custom where the document’s text was lacking.
After its re-charter, the Bank’s management initially made some financial missteps that exacerbated the Panic of 1819. At the urging of President Monroe, the directors appointed Nicholas Biddle, the President’s friend and former secretary, head of the Bank. Biddle, who had worked on behalf of the Americans on the financial details of the Louisiana Purchase while still a teenager, was a financial and management master. Economic conditions improved, and the Bank engaged in a prudently expansionary credit policy. That prudence endeared it to Northerners and Southerners alike. However, the Bank was still unpopular in the West, because its anti-speculative policies frustrated the easy issuance of paper bank notes by state banks to finance loans to purchase and improve land.
By 1832, the constitutionality of the Second Bank of the United States was generally accepted even by its opponents. At least one man begged to differ—Andrew Jackson. To him, the “monster bank” was an abomination on many levels, beginning with his constitutional outlook as a “states-rights man.” More viscerally, he shared the West’s fear of the Bank as an Eastern “money power” and enemy of democracy. As he told Biddle, “I do not dislike your bank more than all banks, but ever since I read the history of the South Sea Bubble, I have been afraid of banks.”
All of these sentiments coalesced into Jackson’s famous veto message on the bill to re-charter the Bank in 1832. The Bank’s charter was not up for renewal until 1836, but Jackson’s anti-Bank screeds in his annual messages to Congress left little doubt about his inclinations. Still, Biddle (who, according to the historian Samuel Eliot Morison, “had the same dislike of democracy that Jackson had of banking”) trod a careful path to keep the bank out of politics. Part of that strategy was to devise, through political intermediaries like Secretary of the Treasury Louis McLane, a course of assisting Jackson in monetary and fiscal policies, such as paying off the national debt by 1836 while smoothing a path to the re-charter. Jackson apparently was amenable to this but wanted any attempt at re-chartering to wait until after the election of 1832 to avoid having to make a potentially difficult political decision that might enrage his supporters.
The delicate political maneuvering came undone when opponents of the Bank, including Attorney General Roger Taney, objected to the terms of a carefully worded draft message to Congress by Jackson in 1831. Jackson substituted wording that was less supportive of re-charter. Still, when the speech was delivered, the Bank’s opponents in the press and in Congress howled.
That response in turn triggered swift action by the Bank’s supporters. The National Republican faction of the old Jeffersonian coalition from which Jackson’s Democrats had split in 1828, met in convention and nominated Henry Clay of Kentucky for President. The Democrats, meeting in a convention of state delegations, re-nominated Andrew Jackson by acclamation. John Calhoun, who had been John Quincy Adams’s vice-president as well as Jackson’s, was out. Instead, the convention chose, with somewhat less enthusiasm, one of the founding organizers of the new Democratic Party, Martin Van Buren of New York (“Old Kinderhook” from whose later campaign slogan would emerge the expression “OK”).
Clay was a consummate politician and, on the basis of experience, highly qualified for the presidency. He was also the opposite of Jackson: urbane, charming, calculating, intellectual, and an accomplished orator. He saw Jackson as a dangerous man, a demagogue likely to become a tyrant, and unsuited by temperament to be president—merely a “military chieftain” in Clay’s contemptuous dismissal. On that point, Clay was not alone. Thomas Jefferson, commenting on the 1824 election to his guest, Daniel Webster, had opined, “I feel much alarmed at the prospect of seeing General Jackson President. He is one of the most unfit men I know of for such a place. He has very little respect for laws and constitutions, and is, in fact, an able military chief….[He] is a dangerous man.”
Still smarting from his loss in 1824, when he had lagged behind John Quincy Adams, Jackson, and William Crawford, Clay was confident that the way to success in 1832 lay in forcing Jackson to face the bank controversy. Either Jackson would sign a charter bill and reverse his notorious opposition to the Bank, or he would suffer the political consequences of a veto that would endanger the popular Bank and risk economic chaos. Enlisting the aid of Senator Daniel Webster, Clay persuaded a reluctant Biddle to agree to move an early bank re-charter bill through Congress. Despite their Democratic majorities, both chambers approved the bill.
The bill landed on Jackson’s desk in early July, 1832. At first, there was silence. But on July 10, Clay’s plan exploded when Old Hickory struck with his veto message. That message was a pungent mix of constitutional theory and outright political demagoguery. Jackson denounced the Bank as a monopoly of the “money interests” that oppressed the average person and against which the law had long protected. At the end of the message, the wily President got in front of Clay’s parade and openly made his veto a prominent part of the campaign, asking for popular approval and declaring that, if he were “sustained by his fellow citizens” he would be “grateful and happy.”
On the constitutional issues, the message was a strong claim for executive power and states’ rights. On the former, Jackson broke with constitutional custom that had always restricted the veto to constitutional objections. Henceforth, the veto would be exercised for policy reasons, and Congress would have to consider the President’s political objections to any bill passed. This shifted the balance of power in the President’s direction in a novel and fundamental manner. Jackson vetoed 12 bills, more than all of his predecessors combined.
Jackson also struck at the Supreme Court, challenging two of Chief Justice Marshall’s most important opinions, Marbury v. Madison and McCulloch v. Maryland. On the former, he rejected the emerging claim that the Supreme Court’s opinions on constitutional matters bound the other branches. Instead, Jackson vigorously affirmed the old Jeffersonian doctrine that each co-equal branch of the government must “for itself be guided by its opinion of the Constitution” when exercising powers committed to that branch, “except where the acquiescence of the people and the states can be considered as well settled.” On the latter, among several objections, he rejected the Court’s finding that the Bank was a federal instrumentality and could be immunized from state taxes. Instead, argued Jackson, Congress’ attempt to do so benefitted a private entity and attacked the “most essential powers reserved by the States,” something never imagined by the Framers.
Congress failed to override that veto. Jackson was resoundingly re-elected, winning 54% of the vote to Clay’s 37%. He carried 16 states, with 219 electoral votes, to Clay’s 6 states, with 49 electoral votes. William Wirt of the Anti-Masonic Party carried Vermont and received 7 electoral votes, while John Floyd of the “Nullifiers” received the 11 electoral votes awarded by the South Carolina legislature.
After the election, Jackson ordered his Treasury Secretary to withdraw government funds from the Bank and to place them in a group of “pet banks” in different states. When two successive Treasury Secretaries refused to comply, Jackson precipitated another constitutional dispute, now over the president’s power to fire department heads and to control the cabinet. Once more, the result was to strengthen executive power in the office of the President.
The Bank struck back, tightening credit and triggering a brief recession. That maneuver backfired and lost the Bank much of its remaining public sympathy and political capital. It was eventually re-chartered as a state institution but went out of existence in 1841. Despite occasional efforts, no successor emerged to the Bank until the Federal Reserve System was created in 1913.
However, Jackson’s victory proved to be Pyrrhic for the Democrats. Van Buren was able to follow Jackson to the Presidency, but the absence of the Bank’s stabilizing influence helped produce the Panic of 1837, one of the most severe economic contractions in American history. The recent federal budget surpluses disappeared, and the hard-won elimination of the national debt became nothing but a memory. Jackson and Van Buren were blamed for the calamitous state of affairs, and Van Buren lost the election of 1840 to the Whigs.
An expert on constitutional law, Prof. Joerg W. Knipprath has been interviewed by print and broadcast media on a number of related topics ranging from recent U.S. Supreme Court decisions to presidential succession. He has written opinion pieces and articles on business and securities law as well as constitutional issues, and has focused his more recent research on the effect of judicial review on the evolution of constitutional law. He has also spoken on business law and contemporary constitutional issues before professional and community forums. Read more from Professor Knipprath at: http://www.tokenconservative.com/.